Tax Law Center Blog

Raju Mukhi of St. Louis MO was indicted last year for his alleged failure to file a report to the IRS on his foreign financial accounts and for filing false tax returns.

United States citizens are required to report income from foreign countries, such as bank account, securities and any other financial accounts on their tax returns.  If the value is more than $10,000, they are required to file a Report of Foreign Bank and Financial Accounts, Form TD F90-22.1 (FBAR).

According to the indictment, Mukhi failed to disclose the existence of Clariden Bank and Goldman, Sachs & Company Bank-Singapore accounts and the income earned in these accounts to his tax preparers for the years 2006 and 2008.  The indictment also states that Mukhi failed to file an FBAR disclosing that he had financial accounts in Singapore and Switzerland for years 2007-2010. Mukhi was indicted by a federal grand jury on two felony counts of filing false tax returns and four felony counts of failure to file reports of foreign bank and financial accounts.

According to the indictment, Mukhi opened an account at Swiss bank Clariden Leu. The account was originally opened in the name Sukhmani Partners II. Later he changed the name on the account to Safekeep. The government said notwithstanding the names on the accounts, Mukhi was the beneficial owner. They also say that he simultaneously opened another offshore account in nominee name at Goldman Sachs Bank – Singapore.

When completing his returns, he checked the “No” box to the question “Do you have interest or signature authority over an account in a foreign country?” Making a false statement on a tax return can be a felony as is the willful failure to file an FBAR form. Mukhi is lucky that he wasn’t also charged with tax evasion as the government often considers nominee accounts – accounts opened in another name – to be an affirmative act of tax evasion.

Each count of filing false tax returns carries a maximum penalty of three years in prison and/or fines up to $100,000. Each of the other counts carry a maximum penalty of five years in prison and/or fines up to $250,000.  In determining the actual sentences, a Judge is required to consider the U.S. Sentencing Guidelines, which provide recommended sentencing ranges.

Earlier this year, Mukhi eventually pled guilty to one count of failing to file an FBAR and one count of filing a false tax return. According to court documents, Mukhi did not disclose to his tax preparers accounts with Clariden Bank and Goldman, Sachs & Company Bank-Singapore, nor income earned in these accounts, in 2006 and 2008. Mukhi also failed to disclose accounts in Singapore and Switzerland from 2007 to 2010, according to the U.S. Attorney’s Office.

He was sentenced to three years of supervised release. Essentially, this means that he is technically in custody but he can avoid incarceration in a prison. Mukhi was likely cooperating and working with the federal government with information on both the banks that housed his accounts. The case records were sealed, which is another indication that there may be some cooperation occurring.

In announcing the convictions, the IRS issued a statement saying, ”Hiding income and assets offshore is not tax planning, it’s tax fraud. We are continuing our work to crack down on offshore tax evasion.”

A timely filed OVDP submission (or maybe SDOP filing) may have saved Mr. Mukhi.

Stay tuned, we regretfully expect more similar indictments and plea deals from other non-compliant taxpayers.